What is the Nexus Tax?

If you haven’t heard of this Nexus Tax, in short, the new tax bill will allow your state to tax earnings from internet affiliate sales. This is causing outrage because it is causing affiliate networks to terminate affiliate contracts for all affiliate marketers that are living within that state. This means that all internet affiliate earnings can possibly disappear if these affiliate networks move out of the state.

Which States Have Been Affected

New York

North Carolina

Rhode Island

Colorado

Who’s Next?

California is on the verge of implementing this tax:

Governor Brown of California has announced he has secured enough votes to pass his budget, including the Affiliate Nexus Tax and 2 related nexus bills: AB 153, AB 155 and SB 234. The law will go into effect immediately upon signing, and he must sign before July 1st, 2011.[Source]

To confirm that this is a bad idea, and Amazon is not bluffing, I just received this email from Amazon today stating:

Hello,
For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

EDIT: Yup, it’s official, we are doomed

I just received this email from Amazon.

Hello,
Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned before today will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect your ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. As mentioned before, we are continuing to work on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

The level of stupidity of California never seems to amaze me. I will be looking forward to moving my business OUTSIDE of California, so they don’t get a dime of my money.

States like California are scrambling to get a dime from wherever they can in order to make up for all of their previous mishandling of funds…and to think these officials actually have degrees in business, economics, etc 😕

But I dont think Texas -where I currently reside- will attempt this one being that Rick Perry already once threatened to secede from the Union 😆

And where does the added tax money go? To the banks and other financial institutions again? US Federal and State Governments are getting more and more stupid each day. In response to Caleb… That is exactly the problem… These people have DEGREES in one area or another… Did Henry Ford have a degree in anything ??? Did any great entrepreneur ever have a degree in anything. No they didn't… They just build their businesses on gut and sweat, not on stupid theories and policies… Take heart however… this form of government mismanagement is coming to an end faster then these policy makers think…

I also want to wish a good luck to all those affected. Join the occupy <state name> movement and help free America from the corrupt people at the top…